Case Note & Summary
The petitioner, M/s. Pancham International, a contractor, was appointed by the Union of India (Respondent No.1) for supply of bush shirts, pants, and slacks under a contract dated 17 March 1992. The contract was amended and extended, but ultimately terminated by order dated 10 June 1994. Respondent No.1 invited fresh tender and claimed damages against the petitioner for risk purchase and general damages. The petitioner contested the claim and filed a counter-claim of Rs.26,80,260/-. An arbitrator was appointed in 2002, and proceedings were held over several years. The arbitrator passed an award on 26 February 2009, allowing the claim of the Union of India for Rs.7,45,800/- towards risk purchase loss and Rs.71,704/- towards general damages with interest at 12% per annum, and disallowing the petitioner's counter-claim as 'unjustified'. The petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the Bombay High Court. The court found that the arbitrator had not considered the evidence and submissions of the petitioner, including the counter-claim, and had merely recorded that the counter-claim was 'unjustified' without any reasoning. The court held that the award was in conflict with public policy as it violated natural justice and was patently illegal. The court set aside the award and remitted the matter back to the arbitrator for fresh consideration, directing the arbitrator to give a reasoned award after considering all evidence and submissions of both parties.
Headnote
A) Arbitration - Setting Aside Award - Public Policy - Section 34 Arbitration and Conciliation Act, 1996 - The court examined whether an arbitral award that fails to consider the contractor's evidence and counter-claim, and is based on a unilateral claim, is in conflict with public policy. Held that the award was patently illegal and violative of natural justice as the arbitrator did not consider the contractor's evidence and counter-claim, and the award was not a reasoned one. (Paras 1-10) B) Arbitration - Natural Justice - Right to be Heard - Section 34 Arbitration and Conciliation Act, 1996 - The court held that the arbitrator's failure to consider the contractor's evidence and counter-claim, and the award being based solely on the claimant's submissions, violated the principles of natural justice. The award was set aside on this ground. (Paras 5-10) C) Arbitration - Reasoned Award - Requirement of Reasons - Section 31(3) Arbitration and Conciliation Act, 1996 - The court observed that the award lacked reasons and merely stated that the counter-claim was 'unjustified' without any analysis. Held that a reasoned award is essential and the absence of reasons renders the award liable to be set aside. (Paras 6-10)
Issue of Consideration
Whether the arbitral award is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 for being in conflict with public policy, particularly for violation of natural justice and failure to consider material evidence.
Final Decision
The court allowed the petition, set aside the impugned award dated 26 February 2009, and remitted the matter back to the arbitrator for fresh consideration. The arbitrator was directed to give a reasoned award after considering all evidence and submissions of both parties.
Law Points
- Arbitration
- Natural Justice
- Section 34 Arbitration and Conciliation Act
- 1996
- Reasoned Award
- Evidence Appreciation
